Answer the following questions true (T) or false (F)
1. Contractionary fiscal policy actions will lead to a decline in farmland values and farm equity as net farm incomes decline.
2. Exports are financially recorded as negative entries in the balance of payments since the products leave the U.S.
3. An increase in U.S. interest rates would cause a decrease in the demand for U.S. dollars.
1. TRUE
2. FALSE
3. FALSE
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The market demand function for wheat is Qd = 10 - 2P and the market supply function is Qs = 4P - 2, both measured in billions of bushels per year. Suppose the government wants to increase the price of wheat to $3/bushel and they impose a voluntary production reduction program to achieve their goal. What is the size of the producer surplus?
A. $8 billion B. $4.5 billion C. $12.5 billion D. $6.5 billion
The basis for international trade is ______________ and ______________.
Fill in the blank(s) with the appropriate word(s).
There is general agreement among economists that a proposed fiscal policy should be evaluated for its:
A. Contribution to the purpose of "fine-tuning" the economy B. Contribution to the growth of exports and imports in the economy C. Potential positive and negative effects on long-run productivity growth D. Potential positive and negative effects on short-run business indebtedness
Refer to the diagram. Assume that the natural rate of unemployment is 5 percent and that the economy is initially operating at point c, where the expected and actual rates of inflation are each 4 percent. If the actual rate of inflation unexpectedly rises from 4 percent to 6 percent, the economy will:
A. move from a to b and eventually to c.
B. move directly from c to b.
C. remain at a.
D. move from c to d and eventually to a.